Movements in working capital
The year-end balances of trade, inventories and other receivables and payables are taken for current year-end as well as last year-end statement of financial position
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Decrease
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Increase
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Inventories
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Cash inflow
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(Cash outflow)
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Receivables
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Cash inflow
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(Cash outflow)
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Payables
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(Cash outflow)
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Cash inflow
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- An increase in inventories implies that more cash has been spent to obtain the inventories; hence it is a cash outflow.
- A decrease in inventories implies less cash has been used to obtain inventories;hence it is a cash inflow.
- An increase in trade receivables'implies that more credit customers are taking longer to pay or takingcredit,which means less cash for company, so cash outflow.
- A decrease in trade receivables implies less credit customers, therefore cash inflow.
- A decrease in trade payables implies the business is paying the suppliers quicker, resulting in cash outflow.
- An increase in trade payables means that business is taking longer to pay the suppliers, so holding the cash in the business longer implying it's a cash inflow.